On January 1 2003 , Santos Hospital issued a $250 ,100 10 percent , 5 - year band for $231 601 . Interest is payable on June 30 and December 31 . Santos uses the effective interest method to amortize all premiums and discounts . Assuming an effective interest rate of 12 percent approximately how much discount will be amortized on December 31 2003 a $2. 230 B . $1 480 C $1 396 d. 5987